Eritrea, increasingly conciliatory, agreed to surrender two other towns demanded by Ethiopia as a condition to stopping the fighting.

From a peak along the front line, Ethiopian soldiers surveyed newly captured ground strewn with ammunition boxes, torn bodies in uniform and corpses of donkeys that had been herded ahead of the advancing troops to clear minefields.

"I believe the Eritrean army has suffered tremendously. But I do not think they will go the peaceful way," said Col. Mulu Ayenaw, while his men raised Ethiopia's flag over the retaken town of Zalambessa.

"I think we need to defeat them some more," Mulu said.

Algerian President Abdelaziz Bouteflika, chairman of the Organization of African Unity, secured Eritrea's and then Ethiopia's commitment to take part in indirect peace talks set for Monday in Algiers to end the 2-year-old war over the poorly delineated 620 mile border.

Eritrea previously had insisted on a cease-fire for talks.

Bouteflika also secured a written pledge from Eritrean President Isaias Afewerki to withdraw from the eastern towns of Bada and Bure.

Eritrea, while insisting the towns were indisputably part of its territory, said it retreated from Bada and Bure to deny its much larger neighbor any further pretext for fighting.

Eritrea insisted its retreat from the border was no resounding military defeat.

"Eritrea has lost territory but Ethiopia has lost most of the battles," presidential spokesman Yemane Gebremeskel said in Asmara.

Gebremeskel estimated Ethiopia had suffered 60,000 casualties since it invaded Eritrea. Eritrean casualties "were not even slightly comparable," he said.

He promised counterattacks to slowly weaken Ethiopian forces a strategy seemingly more in line with Eritrea's 30-year guerrilla war for independence from then-communist Ethiopia.

"I don't know how it's going to go the next two or three days, but I can tell you that at the end of the day, we are going to push them back," Gebremeskel said.